Reject higher taxes, regulatory burden for data centers
Recent US state primaries suggest that attacking data centers or proposing higher taxes and regulations on them is not a winning political message. Despite this, several states have recently adopted new taxes, moratoriums, or regulatory frameworks, while others are proposing similar measures. The article argues that such policies are economically unsound and will lead to higher consumer prices by embedding tax pyramiding into digital infrastructure costs.
Recent US primary elections indicate that rhetoric vilifying data centers and proposals for higher taxes or new regulations on critical information infrastructure are not consistently successful political strategies. In South Carolina, Attorney General Alan Wilson, who did not attack data centers, advanced to a runoff, while opponents like Congresswoman Nancy Mace and businessman Rom Reddy, who proposed a moratorium or complete opposition, failed to secure more than 15% of the vote. Similarly, in Georgia, Lt. Gov. Burt Jones lost a primary runoff after advocating to end data center tax incentives, and Wyoming primary results also suggested anti-data center positions were not electorally victorious.
Despite these electoral outcomes, legislative efforts to impose greater burdens on data centers continue. North Carolina's new budget, signed by Governor Josh Stein, repealed sales tax exemptions for data center electricity costs. New York Governor Kathy Hochul enacted a one-year moratorium on data center construction via executive order, and Illinois Governor J.B. Pritzker suspended all state tax incentives for data centers. Virginia also saw a new tax on data center power consumption take effect. Conversely, West Virginia Governor Patrick Morrisey unveiled a plan for state-level oversight and strict development criteria for hyperscale data centers, aiming to encourage responsible development and offset income tax elimination.
Looking ahead, Texas is poised for a legislative debate next year over sales tax exemptions for data centers, with both Republicans and Democrats on the Texas Senate Finance Committee expressing support for repeal. The authors, Grover Norquist and Patrick Gleason of Americans for Tax Reform, argue that repealing such exemptions for business inputs like data center equipment is bad policy, as it leads to tax pyramiding and ultimately higher consumer prices across nearly all goods and services that rely on digital infrastructure. They contend that this will make states less competitive and harm consumers, despite the bipartisan legislative appetite for such measures.